I always wondered why my 73 year old mother made such a big deal about working as long as she could at her job with the school district when it seemed to me she'd be ready to retire. Ha!  Now I know!  She understands the Social Security system and I don't.

Thankfully, WomenBloom has Diane Owens to help us understand how things work at the SSA so we can make the best financial decisions for our retirement.  Diane has been with the SSA for over 8 years.  In this article, she simplifies the formula Social Security uses to calculate your retirement benefits and offers some useful tools so you can be planning way ahead.

A recent study asked this interesting question:  “Why do women claim Social Security benefits so early?”  The study pointed out that nearly 60 percent of women choose to apply for Social Security retirement benefits as early as possible, at age 62.
 
Many women might say, “And this would be bad because…?”
 
Well, the answer is that while most of us can understand the desire to pursue retirement dreams as soon as possible, the truth is that working an extra year or two before retiring can provide extra money to help you realize those dreams.  You would have the chance to build your investment portfolio, make additional 401(k) contributions and increase your future Social Security retirement benefits.
 
Let me focus here just on the Social Security considerations.

While you only need 10 years of working and paying Social Security taxes to qualify for retirement benefits, your Social Security retirement payments will be based on your 35 years of highest earnings.  If you don’t have 35 years of earnings, then we use a zero for each year without earnings when we do our calculations to determine the amount of retirement benefits you are due.

Many women, because of lower average wages and interrupted work histories to care for children and older relatives, can have a number of low-earning years or “zero earnings” years figured into their computation.  In fact, current Social Security data estimates that women born between 1946 and 1960 will have an average of 3 to 4 years of zero earnings in their benefit computations.  Working an extra year or two allows you to replace a year or two of low (or zero) earnings with higher earnings.

Do you know how many years of earnings you have under Social Security?

You can find out if you check the Social Security Statement that is mailed each year to every worker age 25 and older.  Read it carefully because it contains information vital to your personal financial future.  It shows how much you and your family can expect to receive from Social Security when you retire, or if you become disabled or die.

In July, Social Security also introduced a new online “Retirement Estimator”.  Getting a personalized estimate of your future retirement benefits is now easier than ever before.  The online Retirement Estimator is a convenient, secure and quick financial planning tool that lets workers calculate how much they might expect to receive in Social Security benefits when they retire.  

The attractive new feature of this calculator is that it eliminates the need to manually key in years of earnings information.  It’s so easy to use.   The Estimator also will let you create “what if” scenarios.  You can, for example, change “stop work” dates or expected future earnings to create and compare different retirement options and see for yourself the difference a few extra years of work would make in your benefits.

Visit www.socialsecurity.gov/estimator.  To get an estimate, you’ll need to enter your first and last name, date of birth, Social Security number, mother’s maiden name and place of birth.  If the information matches our records, then you can enter an expected retirement age and future wages.  The Estimator combines this information with the information that we have on record, including your yearly earnings, to provide a quick and reliable online benefit estimate.

To protect your privacy, only the final retirement estimates are given to you online.  The Retirement Estimator does not show your earnings record information on which the final benefit estimate was calculated.  And it does not reveal any personal information, such as your address, earnings or other information, that could lead to identity theft.

If you want more information about the role of Social Security in women’s lives today, Social Security has a special For Women website that you may find useful.  You can find it at www.socialsecurity.gov/women.

Diane Owens is a Social Security Public Affairs Specialist and has worked for the SSA for over 8 years.  She knows a lot about Social Security and enjoys helping women navigate the ins and outs of the system. Thank you, Diane!

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